EXCLUSIVE: Smartwatch margins are unsustainable says Aurum Group CEO

The rise of smartwatches has barely moved the needle on the Aurum Group dashboard, the company’s chief executive says.

In a wide-ranging interview to be published in the January edition of WatchPro, CEO Brian Duffy says smartwatches may be creating new watch customers, but are not eating into the share of traditional watch brands.

“I don’t personally think that smartwatches have had any noticeable impact on the market,” he says.

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“To the extent that they are being bought, I think the effect is incremental. I think it could just be people buying from us that might otherwise not have bought at all because we certainly cannot detect anywhere a negative impact on our business at any price point because of Apple Watch or any other smartwatches,” he adds.

He also criticises smartwatch suppliers for their pricing policy this year. “There is an industry challenge, which is the retailer margin on smartwatches is too low. The price points that have been set are making margins too low to be sustainable. Every brand that is doing smartwatches is positioning them with a retailer margin that is well below a typical watch margin for any normal price point,” Mr Duffy states.

Other retailers are more positive about the potential for smartwatches. A business owner with five stores, who asked not to be named, confirms that most of the smartwatches they stock do have slightly lower margins, the brands say that this is due to the technology involved in production and the need to hit an attractive price point that makes the product attainable.

“I would strongly disagree that the reduced margin/pricing policy is unsustainable, as the popularity of the product and exclusivity in terms of distribution means it attracts no discount or dual pricing,” the retailer adds.

A buyer for a major multiple, who also asked that their name is not used, says he hopes brands will improve margins as volumes increase.

“The margins are indeed much lower for smartwatches, and reason given is because of all the R&D costs involved, and I’m sure if it grows in popularity then these costs will reduce….whether these savings are then passed onto the retailer may be a different matter,” WatchPro is told.

But the retailer is more content to keep experimenting with smartwatches. “At the moment (stock availability withstanding) the demand for this product softens the blow caused by the lower margin. For me the big question is how big will this trend become, or will it stay as a very insignificant part of a watch retailer’s portfolio, it will be interesting to see how it develops,” the buyer says.